PlayStation 3 Price Cut Should Spur Sales, Analyst Says

By Nathan Eddy |
Posted 2009-08-22

Sony finally announced a price cut on its
expensive game console, the PlayStation 3, this week, cutting the price for the
120GB version to $299, starting Sept. 1, while the price of the PS3 with a
160GB hard disk drive was reduced to $399 on Aug. 18.

Facing a tough market and an impending holiday shopping season, many
analysts felt Sony was overdue for a price reduction. The console price cut
came along with a redesign of the player, which sports a new finish and a
slimmer profile.

NPD Group analyst Anita Frazier told Information Week the price cut is likely to
spur sales, predicting Sony could see sales rise as much as 60 percent in the United
States in September. "The $299 price
point is important to getting to a point where the next segment of
price-conscious consumers can jump into the market and it most certainly will
re-energize sales of the platform," Frazier told the publication via an
e-mail interview. "We would expect to see in the range of a 40 percent to
60 percent unit sales increase when September sales are reported."

In the light of NPD Group's July report on video game industry hardware and
software sales, Sony's gaming system faces an uphill battle as it lags in sales
behind its competitors, the Microsoft Xbox 360 and the Nintendo Wii. Sales of
the PlayStation 3, Xbox 360 and Wii consoles all saw steep declines for the
month of July, NPD Group reported, while industry sales overall dropped 24
percent compared with the same period in 2008, to $848 million. "Content is
still the key motivator of a hardware purchase decision," Frazier said.
"Other systems might too take a price cut, so there's a lot playing into
which system tops sales any particular month."

Sony said the internal design architecture of the new PS3 system, from the
main semiconductors and power supply unit to the cooling mechanism, has been
completely redesigned in order to craft a more compact console. Compared with
the very first PS3 model with a 60GB HDD, the internal volume as well as its
thickness and weight are trimmed down by approximately two-thirds. Furthermore,
power consumption is cut by two-thirds, helping to reduce fan noise, the
company said.

Along with a revised interior architecture, the console also received an
updated version of the Cell microprocessor, jointly developed by IBM,
Sony and Toshiba. The new chip, manufactured using 65nm rather than 45nm
technology, increases processing speed while requiring less energy to run.

NPD also reported sales of gaming systems
and consoles fell to $280.9 million in the month of July, representing a 37
percent drop from the same period last year. While the numbers were dismal,
Nintendo once again managed to stay on top of the competition: The gaming
company sold 538,900 units of its handheld DS player, which retails for around
$130. Nintendo's popular console system, the motion control-based Wii, was the
second-best-selling gaming device in July, racking up 252,500 sales.

The Wii led sales in June, moving 362,000 units and holding onto its spot as
the best-selling console for the 21st (now 22nd)
consecutive month. The third best-selling device was Microsoft's Xbox 360,
which sold 202,900 units, down from 240,600 in June. Sony's pricey PlayStation
3 console/Blu-ray player saw sales decline steeply to 121,800 units, down from
164,700 units in June.